During the quarter, the iMGP DBi Hedge Strategy ETF gained 4.05% at NAV and 3.90% at price versus the Morningstar Long-Short Equity Category benchmark gain of 5.99%. For the full year, the ETF was up 7.91% at NAV and 7.24% at price, compared to a 10.13% gain for the benchmark.
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.imgpfunds.com.
2023 turned out to be a humbling year for macro strategists. The taper is coming a year late, the economy never hit the windshield, and Powell might actually pull off the Immaculate Landing.
And so the big surprise is that it turned out to be a great year for investors. Powell’s sudden rhetorical pivot in early November triggered a massive melt up in risk assets. In two months, the MSCI World delivered nearly two thirds of its 23.8% calendar year return, while bonds – down over 3% through October – finished up 5.7%. The Everything Rally appears to have been driven by both the widespread conclusion that the rate hike cycle was over, but also a desperate catch up for investors underweight equities and duration. By year end, the price moves implied far more aggressive easing in 2024 than either Central Banks or economists forecast.
As discussed extensively in these letters, the market consensus is rarely accurate and frustratingly unstable. Contrarian investors who nailed 2022 were often wrong-footed in 2023; assets that soared in 2023 were climbing out of a deep drawdown hole. The lesson of the past several years is that the unexpected happens with alarming regularity, and the spectrum of outcomes is far wider than we expect. Today, as investors breathe a sigh of relief that the worst of the rate hike cycle might be behind us, they soon may have to turn their attention to a laundry list of headwinds, from worsening geopolitical chaos to deepening sociopolitical fragmentation to uncontrolled fiscal largesse to persistent ripple effects from higher rates to things not yet on our plate of worries. In such a world, we encourage diversification and liquidity to help clients weather the coming years.
Equities, excluding emerging markets, were accretive to performance; led by growth and value biased segments, which were largely dominated by technology and AI stocks. Expectations that interest rate cuts may be on the horizon, aka the Everything Rally, drove performance in most sectors this quarter, as further evidenced by Fund gains in currencies and 2-year Treasuries as well. Conversely, a short in 30-year Treasury futures detracted from performance.
|Net Asset Class Exposure (%)
|International Developed Equities
|Emerging Market Equities
|Top 5 Holdings
|2 Yr Treasury